Structural Adjustment and International Migration: An Analysis of the Thai Clothing Industry

Abstract

This paper examines the structural adjustment process using evidence from the Thai clothing industry, with a view to informing the policy debate about international migration. The analysis is based on in-depth interviews with 50 clothing firms in Thailand during November 2009–February 2010. The key finding is that not all firms opt to hire unskilled foreign workers. The differences in company characteristics between firms that hire foreign workers and those that do not are clear. The latter are likely to be relatively large in size (in terms of both employees and sales), perform better and actively undertake upgrading activities. The former are typically struggling to maintain their profit margins, are relatively small and do not adequately invest in upgrading activities. Interestingly, hiring foreign workers is not the first response of firms, but reflects a tightening in the labour market and the fact that these companies have not yet successfully undertaken process upgrading. Allowing unskilled foreign workers in on a temporary basis with appropriately designed measures would be a win–win solution for labour-importing and exporting countries, as well as for the migrants themselves. The paper raises concerns about imposing one-size-fits-all policy measures in managing the flows of unskilled foreign workers.     

Workers' Remittances,Capital Inflows,and Economic Growth in Developing Asia and the Pacific

This paper examines the impact of remittances on economic growth, using developing countries in Asia and the Pacific as a case study. Using data for the period 1993–2013, our results show that remittances only generate negative and significant impacts on economic growth if they reach 10 percent of GDP or higher. A remittances‐to‐GDP ratio of below 10 percent could still impact growth negatively, but the effect is statistically insignificant. The present study finds some degree of substitutability between remittances and financial development. Foreign direct investment (FDI), but not other types of capital inflow, contributes significantly to economic growth. Other traditional growth engines, including education, trade openness, and domestic investment, are crucial in promoting growth in developing Asian and Pacific nations.     

Australian–Thai Trade: Has the Free Trade Agreement Made a Difference?

This article examines the impact of the Thailand–Australia Free Trade Agreement (TAFTA) on bilateral trade between the two countries, paying attention to the implications of rules of origin and the utilisation of tariff preferences. It is found that trade has expanded faster since TAFTA came into effect, but the impact has heavily concentrated in a few product lines in Australian imports from Thailand, reflecting the influence of commodity‐specific, supply‐side factors which have a bearing on the rate of preference utilisation. The findings, inter alia, suggest that the use of officially announced preference rates in trade flow modelling is likely to exaggerate trade flow effects of free trade agreements.     

Effectiveness of industrial policy on firm productivity: evidence from Thai manufacturing

This paper examines the effects of industrial policy on firm productivity, using a three-year panel data set of Thai manufacturing as a case study. A range of industrial policy tools is defined, including tariff measures, subsidies, and investment incentives through the Board of Investment (BOI), which represent the main industrial policy tools used in Thailand. The effect of ‘water in the tariffs’ and partial trade liberalisation undertaken through free trade agreements (FTAs) signed between Thailand and her trading partners is also examined. The key findings concern the role traditional tools, that is trade openness, R&D, and skills upgrading, play in fostering firm productivity. Promoting a conducive environment, especially within domestic competition, is crucial in encouraging firm productivity. Some industrial policy tools are effective in promoting firm productivity, that is providing investment incentives via the BOI and lowering tariff protection. Subsidies, by contrast, tend to degrade firm productivity. Among trade protection measures, the effective rate of protection, which includes water in the tariffs encountered by exporting firms, has the greatest effect on firm productivity. The FTA-led trade liberalisation fails to add substantial competitive pressure and induce firms to improve productivity. Such statistical insignificance reflects the nature of FTA commitments that Thailand has made so far.     

Cross‐border Mergers and Acquisitions and Financial Development: Evidence from Emerging Asia

This paper examines the relationship between cross‐border mergers and acquisitions (M&A) and financial development in emerging Asian economies. Bilateral cross‐border M&A data for nine emerging Asian economies covering 2000–2009 are analyzed with a sample selection model and a panel data model. The estimation results show that although the banking sector still plays a crucial role in facilitating cross‐border M&A, the role of equity markets has increased in importance because, in addition to cash, the issuance of common stock and the exchange of stocks have become popular forms of payment for M&A deals. Because of the relatively thin market, the primary corporate bond market plays a limited role in supporting cross‐border M&A, which is in contrast to the primary public bond market. However, for the secondary market, the corporate bond market is more effective in facilitating cross‐border M&A. The results also show that financial development in terms of stock and bond markets in their home countries tends to become more important when the target firms reside in more developed countries. In addition to financial development, the paper shows that most cross‐border M&A are invested in technology‐related and resource‐based industries while cheap labor industries are relatively less attractive.     

Exporter responses to FTA tariff preferences: evidence from Thailand

This paper focuses on how exporters respond to free trade agreement (FTA) preferential schemes by analysing the administrative records of FTA implementation at the product level in Thailand. The key finding is that while there is growth in the number of FTAs with a potentially larger membership than existing FTAs, firms tend to prioritise existing FTAs. Moreover, only a narrow range of products are involved in applications for FTA preferential schemes. As a result, only one‐third of exports are covered by such arrangements. The key determinants of firms applying for preferential schemes include tariff margins, the ability to comply with rules of origins (ROOs) and the economic fundamentals influencing trade. Hence, it is less likely for FTAs to open up export opportunities for products that are either yet to be traded or of low prospective trade volume. Estimates of the costs of complying with ROOs average 8.6 per cent of tariff equivalence. The cost approaches zero for developed countries but is substantially higher for developing nations. The key policy inference is that the export‐enhancing effects of FTAs are passive at best, working only after economic fundamentals are established. For us to harness the trade‐inducing effects of FTAs, reducing costs incurred from the presence of ROOs from both exporting and importing countries should be the prime focus.